Congressional Report Says Corruption Is Stifling Bosnia

Pervasive crime and corruption are blocking the success of the Dayton peace accord in Bosnia, and the Clinton administration should consider suspending its extensive aid until local authorities show a determination to fight such abuses, a General Accounting Office report concludes.

The report by the investigative arm of Congress found that the failure of local authorities to curb graft, organized crime and other abuses could interfere with the eventual withdrawal of American and other NATO troops.

According to a draft copy of the report obtained by The New York Times, top American and international officials asserted that ''there has been no measurable progress in reducing crime and corruption in the four years since the end of the war.'' The final report is to be released to lawmakers on Friday.

Authorities in Bosnia, the report said, ''have not demonstrated a desire to eliminate corruption and develop a society based on the rule of law.'' Despite international efforts to establish a functioning legal system, ''the Bosnians have chosen not to cooperate,'' opting instead to create ineffective committees, the report said.

The G.A.O. said it would recommend that Secretary of State Madeleine K. Albright consider suspending additional monetary assistance until local governments demonstrate the willingness and ability to crack down.

The report's findings come while there is wide skepticism in Congress about the progress of the international effort to rebuild a self-sustaining, multiethnic Bosnia based on the Dayton Peace Agreement, which was signed by Croatia, Yugoslavia and Bosnia's three major ethnic groups in December 1995. The report may also be seen as having implications for United States involvement in Kosovo.

The report states that Congress may wish to condition future American assistance on State Department certification that the Bosnian government has taken measurable steps to fight corruption, control smuggling and reduce tax evasion.

''This G.A.O. report on Bosnia reveals that crime and corruption are so endemic at all levels of the Bosnian society that our goals -- and those of the entire international community -- in Bosnia cannot be achieved until we confront this problem head on,'' said Representative Benjamin A. Gilman, Republican of New York, who is chairman of the House International Relations Committee.

By last December, the United States, the European Union and other donors had committed more than $4 billion to help reconstruct Bosnia after a war that killed more than 250,000 people and forced 2.3 million from their homes, according to international estimates. President Clinton has requested over $100 million for assistance to Bosnia in 2001.

The report said that the United States has not recovered nearly $900,000 in operating funds for the American Embassy and loan payments it had deposited in a Bosnian bank, BH Banka, which was involved in illegal activity.

And the World Bank lost $500,000 in 1997 in a sophisticated fraud scheme involving false government procurement documents, the report said. Three years later, no arrests have been made, the report added.

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Bosnia's presidency rotates among its three prominent ethnic groups -- Muslim, Croat and Serb. Two members of the presidency are elected from the Muslim-Croat Federation and one from Republika Srpska, the two entities of today's Bosnia-Herzegovina.

The G.A.O. found no evidence that American or other international aid is ''being lost to large-scale fraud or corruption.'' But it asserted that Bosnian authorities may be using the foreign donations to make up for income the government has lost to crime.

Bosnian officials have failed to collect ''hundreds of millions of dollars'' in income tax, the report said.

Sounding a less dire note, foreign diplomats and aid officials in Bosnia asserted that economic and judicial reforms take time. While they note that they are powerless to crack down on abuses themselves, they insist that there are stringent safeguards to protect foreign aid and that additional financing is contingent on performance.

''We are all being extremely careful now,'' said Wilhelm Schmid, the Swiss ambassador to Bosnia, whose nation has tightened its controls on budgetary support. ''It would be unfortunate to stop help for the needy because of the criminal activities of a few.''

Administration officials said today that they have not not seen a final version of the report. But a White House spokesman said the American investment, including the open-ended deployment of about 4,300 troops, is helping Bosnia to ''rise above these problems.''

''Our presence in Bosnia helps build a stronger civil society, including respect for the rule of law and greater transparency in government,'' said the spokesman, P. J. Crowley. ''Where we have seen evidence of corruption, we have worked with the international community to take appropriate action.''

Mr. Crowley said the administration would decide whether to maintain troops in Bosnia ''based on what needs to be done, as opposed to an arbitrary pullout date.''

Under the Dayton agreement, NATO forces are to be withdrawn only after progress in reducing corruption and organized crime, including the elimination of illegal institutions, the creation of a democratic law enforcement system and judicial reform.

The G.A.O. cited shortcomings in each of those areas, denouncing bribe-taking local bosses of political parties, police officers in the service of business interests who intimidate citizens or return refugees, and an underground economy that accounts for about half of Bosnia's entire economic output.